Victorian home approvals fall as new unit pipeline plunges, builders raise fears of government targets

News.com.au

06-05-2025

Victorian home approvals plunged in March, with the number of apartments, houses and units being green lit by authorities dropping by more than 1500 from February.
It comes as building industry insiders have revealed they now fear what will happen if new home construction does eventually rise in line with government hopes — with many still falling into insolvencies as a result of the nation's last building boom in 2021.
Latest Australian Bureau of Statistics data shows in original numbers there were 2655 houses approved in March, down by about 200 (7 per cent) compared to the month prior.
Unit approvals were vastly lower, tumbling from 2294 in February to just 671 the following month.
For the 12 months to the end of March there were 56,000 new homes approved across the state, a substantial uptick from the 51,150 given the nod by planners in the prior year — and the best annual figure since 2023.
Housing Industry Association senior economist Tom Devitt said the numbers were far below the about 75,000 new home approvals needed for Victoria to cover its share of the nation's 240,000 a year target under the National Housing Accord's 1.2 million extra homes goal by 2029.
Mr Devitt said the numbers were not expected to improve in April, and it could take some time for the apartment pipeline in particular to rise.
AS a result, the economist said HIA was not anticipating Victoria would move past 65,000 home approvals in any year remaining within the Accord's timeline — unless there were substantial changes to federal and state policies around housing, and an increase in skilled migration for building industries.
Sustainable Homes Melbourne director Simon Clark said he was becoming concerned about how the industry would cope if government targets were to be hit.
'There may be builders who will get more work, but there will be others scared off by the amount of insolvencies,' Mr Clark said.
'And there's just less builders to build the homes, now.
'Once that picks up, I don't know where that work force will come from.'
Latest Australian Securities and Investments Corporation data shows 2854 construction firms went into external administration from the start of this financial year to April 20. There were 2319 in the same period of the prior financial year, and 1695 in the 12 months ahead of that.
Numerous builders who signed fixed contracts with home buyers as part of the HomeBuilder scheme were caught out when substantial cost hikes caused by material shortages drove up the cost of producing a home in a matter of months.
The latest ABS data shows Victoria's average house build now costs $517,000 — up from $484,000 a year ago and far above the $363,000 typical cost in March 2020, just before the pandemic.
Mr Clark, whose own business is more skewed towards extending existing homes to make them more sustainable and typically handles 10-12 a year, added that with heavy numbers of insolvencies, he would anticipate new houses would face price rises if there were not sufficient numbers of builders.
Mr Devitt said while HIA believed builders would have a better understanding of their capacity from the last building boom's fall out, it wasn't surprising that some would be fearful of what would happen to them if there was a surge in activity and demand.
'Given the boom that they have come from over the past few years, it's fair to worry about what the future holds,' Mr Devitt said.
'But our current forecasts aren't for the big a big boom compared to what we saw during the pandemic.'
Mr Devitt said the industry fears were another reason the federal government needed to allow for more skilled trades migration in the construction sector.